Curious Iowa: Why doesn’t Iowa have toll roads?

Thirty-six U.S. states have toll roads, including Iowa’s neighbors Minnesota, Nebraska, Missouri and Illinois. Why not Iowa?

Troy Reuter, of Colesburg, drives professional and avoids I-80 “like the plague.” He wrote to Curious Iowa — a Gazette series that answers readers’ questions about our state and how it works — with an idea.

“Why doesn’t Iowa turn a section of I-80 into a toll road? Vehicles from all over America tear it apart daily as this major artery across the U.S. is jokingly referred to as flyover country. Local trucks could get an exemption, but the others can help pay for the costs of repairs.”

To answer Reuter’s question, we spoke with the Iowa Department of Transportation about the considerations that have kept Iowa a toll-free state.

How does Iowa pay for highway and bridge improvements?

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Stuart Anderson, director of the Iowa DOT’s Transportation Development Division, told The Gazette in an email that the state regularly reviews how it funds transportation. While tolling has been considered from time to time over the years, the conclusion has been that it is “not a viable funding mechanism to use in Iowa, nor is it necessary.”

“To begin with, tolling is typically used in conjunction with the issuance of bonds and then toll revenues are used to pay off that debt and associated interest. The state of Iowa has utilized a pay-as-you-go user fee system to provide state funding for highway and bridge investments on Iowa’s public road system.” Anderson said. “This practice has served the state well in assuring state road funding is utilized to directly support the maintenance and improvement of Iowa’s public road system.”

The construction, maintenance and administration of Iowa’s highways is primarily funded through the Road Use Tax Fund (RUTF), which was established in 1949. The RUTF’s largest source of revenue is a tax on fuel. This includes gasoline, ethanol-blended gasoline, diesel and biodiesel. Annual vehicle registration and new vehicle registration fees fund the RUTF as well.

In 2007, the Iowa Legislature created the Transportation Investment Moves the Economy in the 21st Century (TIME-21) Fund. TIME-21 overlaps with some of the same sources as the RUTF. It’s funded through portions of annual registration fees, fees paid for a certificate of title, and trailer registration fees, to name a few. According to the Legislative Services Agency, these fees were deposited in the RUTF prior to the creation of TIME-21.

In Fiscal Year 2025, which ends June 30, it’s estimated the Road Use Tax Fund and the TIME-21 Fund will collect and distribute approximately $2 billion, Anderson said. That money will support maintenance, administration and improvement of Iowa’s roads.

Do electric vehicles contribute to the Road Use Tax Fund?

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The largest source of revenue to the RUTF is fuel taxes. This includes gasoline, ethanol-blended gasoline, diesel, and biodiesel. The Iowa Department of Revenue is responsible for setting fuel tax rates annually based on the market share of ethanol and biodiesel.

Don Haler, of Waukon, wrote to Curious Iowa to ask whether electric cars pay the road use tax. Yes, electric vehicles contribute to the RUTF in a few ways.

When a new electric vehicle is registered, its owner pays a fee for new vehicle registration and the annual vehicle registration fee, just like gas vehicles. What makes electric vehicles unique is a supplemental annual registration fee. For a battery powered electric vehicle, that fee is $130 per year. Plug-in hybrid electric vehicles pay $65 per year and motorcycles pay $9 each year.

Additionally, there is an excise tax of 2.6 cents per kilowatt-hour for charging locations not located at homes.

Anderson said the supplemental annual registration fee is intended to cover user fees not incurred due to not paying or paying a reduced amount of fuel tax.

Not all RUTF money goes to the state. According to Iowa Code, 47.5 percent of the revenue is allocated to the DOT for primary roads; 24.5 percent goes to counties for secondary roads; 8 percent is allocated to counties for farm-to-market roads; and 20 percent goes to cities, after other distributions and appropriations are taken off the top.

Primary roads receive 60 percent of TIME-21 distributions, while secondary roads receive 20 percent, and 20 percent goes to the City Street Construction Fund.

Is funding for road projects keeping up with need?

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In fiscal year 2024, 777 projects totaling $1.23 billion were awarded through the Iowa DOT. This includes all Iowa DOT construction projects and major projects at the city and county level.

“This does not include all the projects awarded by cities and counties in fiscal year 2024 because they also award projects at the local level,” Anderson said.

He said that in every study the DOT has completed looking at existing and future highway and bridge needs, the needs have exceeded available funding.

“However, it’s never been expected that all needs rise to a level that requires an immediate investment,” Anderson said. “Therefore, those past studies also include an assessment of that funding shortfall in addressing the most critical needs that exist on Iowa’s public roadways.”

Anderson said in the last study, completed in 2021, it was noted that inflation was making projects more expensive, which makes it difficult for the DOT to undertake as many highway and bridge projects as it has in the past.

“Those inflationary issues have only become more significant in recent years,” he said.

The DOT is just getting started on its next evaluation of road needs and funding availability. The results are due to the Iowa Legislature by the end of 2026.

Why doesn’t Iowa implement toll roads?

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In 2018, the DOT completed a planning study of I-80. Part of the study looked at the possibility of installing tollways along I-80 to fund widening the interstate.

The Gazette previously reported that the study found that it would be financially feasible to pay for nearly $4 billion in interstate improvements by implementing tolls. But Mark Lowe, who was DOT director at that time, said tollways were “just not a good fit for a rural, farm-to-market state like Iowa.”

“Tolling certainly has a place, particularly in highly urbanized, highly controlled, highly congested corridors, but that’s not really how to describe Iowa’s system.” Lowe said.

Tolling was reassessed in a 2021 road funding study, but again, the idea didn’t move forward.

Anderson said that in addition to the substantial up-front and ongoing administrative costs that come with the implementation of tolling, planners believe motorists would find ways around the tollways.

“In addition, if tolls were applied to a highway segment, we expect that a portion of traffic would shift to alternative routes and corridors and create operational and safety issues on those other corridors.” he said.

“For these reasons, Iowa DOT has concluded that tolling is not viable in Iowa and that our existing user fee system is sufficient to provide state investments in Iowa’s public road system.”

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Comments: bailey.cichon@thegazette.com